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Court throws FCC Net rules out

Internet providers' plans to provide more efficient, cost-effective service could be dampened by a new appeals court ruling, experts say.

Internet providers' plans to provide more efficient, cost-effective service could be dampened by a federal appeals court ruling issued late yesterday, experts said.

The ruling, handed down by the Eighth Circuit Court of Appeals, threw out key rules drafted by the Federal Communications Commission for implementing a sweeping telecommunications law passed last year. The rules are designed to open up local phone markets to long distance carriers and others. The three-judge panel held that the rules didn't square with the Telecommunications Act of 1996.

Besides affecting the plans of long distance carriers trying to break into local markets, the ruling could throw a monkey wrench into strategies of telephone companies and ISPs. For example, it is likely to affect plans by telcos such as MCI Communications (MCIC) to bundle local and long distance phone service and Net access in one package.

The FCC rules implementing the telecommunications act had made that strategy possible. Now that the FCC regulations have been thrown out, it is unclear if, or how, the companies will be able to proceed.

The ruling may also affect smaller ISPs' plans to bypass local phone companies in connecting to the Net, according to Kathy Kleiman, president of the Domain Name Rights Coalition. Under the FCC regulations, ISPs could qualify as so-called competitive local exchange carriers (CLEC), a status that would give them direct access to local exchange carriers at steep discounts.

Kleiman, a Virginia attorney who practices Internet and telecommunications law, said many ISPs are eager to bypass their local phone companies, which they often characterize as unresponsive and unreliable.

"Certainly, this decision will make [the process of becoming a CLEC] more difficult and delay the process," she said, adding that the FCC has the option of appealing the court ruling to the Supreme Court or rewriting its rules so that they pass muster with the St. Louis-based court.

Given the pending commissioner overhaul at the FCC, Kleiman said, the ruling comes at a difficult time for the agency. "One way or another, there's going to be a tremendous delay in fully opening up the local [phone] loop to competition."